A Credit history report is a compilation of factual data that helps lenders to accept or reject your credit application. The credit history report does not indicate whether you are a good or a bad credit risk. It is just a tool used by lenders to ascertain your credit worthiness based on their own judgments.
Lenders invariably examine your history before extending mortgage loan, personal loan, and auto loan, issuing a credit card or any other form of credit. Employers may also ask for a credit history report to determine how financially responsible and stable the applicant is. Depending on your history and credit rating, the lender may accept or reject the application or might offer you debt at a higher interest rate. The lender does this in order to protect his investment, which is in the form of financial credit. For the lender, you are just another applicant and there is no way to determine how credits worthy you are. Even if the lender knows you through a common acquaintance, there is no way to determine if the information coming from the common source is authentic. A credit rating is instrumental in this regard from lenders point of view.
Who Compiles Credit History Report?
Before understanding what the constituents of a credit history report are, it is important to know who compiles your credit history report. Credit history reporting dates back to 1830’s. However, at that point of time anyone who paid a price had access to credit history of a person. Once the system was modernized and became regulated, only certain entities – apart from yourself – are given access to this vitally important data. Agencies that compile factual records of your financial history are called as Credit Reporting Agencies (CRA). Though there are hundreds of CRAs throughout the country, TransUnion, Experian and Equifax are the only ones which are nationally recognized.
Constituents of Credit History Report
Credit reports and credit scores are entirely different and should not be confused with each other. Your credit history report does not include your credit score. Credit bureaus calculate your credit score based on the information in a credit report. There are different versions of credit history report and the CRA issues one to the requestor depending on the purpose for which the report needs to be used. If you are requesting the credit history report for yourself, it is comprehensive and has following information –
A credit history report does not include information relating to race, ethnicity, religion, criminal records, income details and bank balances.
CRAs have a network of affiliates which provide necessary information required to compile a credit history report. Lenders, financial institutions continually feed information relating to credit applications, rejections and payments to CRAs. Every time a credit is extended to you, the lender supplies this information to the CRA or its affiliate which is then saved centrally.
Who Can Access Your Credit History Report
Stipulations are laid down concisely on who can request your credit history report. The reasons for which a report can be accessed are also specified. Financial institutions, mortgage lenders, credit card companies with whom you may have initiated credit dealings are authorized to access your credit report. Employers after getting a written consent from you can also be given access to a copy of your credit report. At times, financial services companies are provided with your name and address (based on certain criterion) to offer you pre-approved financial products. They however have very limited access to the report. Any person of agency which tries to access your report under false pretenses can be fined or may be sent to jail.
Factors Affecting Credit History
Number of factors can affect your report in a negative way. Thus, it is recommended that every year you should request for a free copy of your credit history report from all the three major CRAs and rectify any inaccurate information. Factors that can affect your report include –
All of the above mentioned factors need to be monitored regularly to keep your credit worthiness in good health. Lenders use this information to decide if credit can be given to you or not.
What If Your Credit History Report Has Inaccuracies?
It is entirely possible that an inaccurate piece of information has percolated in your credit report. It might be because of inaccurate information provided by a merchant or a lender. Thus, if you find something is amiss, write to the CRA explaining the inaccuracy. It is also important that you supply pertinent information and supporting documents to prove your claim. If your claims are valid, the CRA needs to make changes to the credit history report and send in a fresh copy of your amended credit report within 30 days.
If you are about to apply for a major credit such as a mortgage loan, first obtain your report, study it for inaccuracies and request to make changes before you make the mortgage application. This will ensure that your application is approved without any hassles.